Accounting Best Practices, Fifth Edition

7–22. Report on Ongoing Customer Complaints

Some customers deliberately issue a series of complaints about an order, with the sole intention of extracting concessions from the company in the form of payment deductions, late payments, and product upgrades. Such a customer initially appears to be profitable, based on the standard profit on the products ordered. However, when the cost of employee time, deductions, and delayed payments are netted against the initial profit, transactions with these customers frequently end up being a loss.

The collections staff is probably well aware of these customers, since they must deal with them constantly. However, management does not deal with customers on a daily basis, and so needs a reporting system that can reliably pinpoint who is causing problems on an ongoing basis. They can then use this information to determine when the company should stop doing business with selected customers.

The reporting system should compile a customer complaints score based on the number of problems accumulated by the customer, in the form of such factors as deductions taken, calls recorded in the customer service database, and average days to pay. The report should accumulate this information over the recent past, such as the last three months or six months, and present customer scores in declining order, so the worst customers are listed at the top of the report.

If this reporting structure is too difficult to assemble, then at least manually summarize the various ...